Thursday, October 22, 2009

MARUTI after nearly quadrupling itself from Dec-08 lows has broken the 8-month old up channel. Now the stock is showing a bearish H&S pattern and below Rs 1450 it may give downside of Rs 200-250 more also. 

Caution advised in this stock :-

  • Exports were an important part of revenues for MARUTI in last 2-3 months and now with Rupee appreciating by more than 13% will impact negatively.
  • GERMANY and AUSTRIA are not extending the Scrappage Incentive Scheme which was launched in EU this year to boost car sales, major beneficiaries were MARUTI and HYUNDAI and slowly these benefits will disappear as EU countries stop the incentives for car buyers.
  • MARUTI has more than 50% market share in Indian car industry and it has hit all time high sales almost every month in 2009. This was on the back of stimulus from government, 6th pay commission and festive season recently but now higher base effect will impact sales as it is always difficult to raise the performance every month for an indefinite period.
  • Crude Oil prices have touched above $81 which may  make policy-makers rethink on fuel pricing, any increase in Petrol/Diesel rates will impact the sales of MARUTI negatively.
  • Metal prices have risen along with other commodities and rising input costs can be one more disturbing factor.
  • Labour unrest in auto belt of Gurgaon has hampered production of many companies in that area and MARUTI is the one which was affected to some extent. 
The stock has gone up from Rs 433 to Rs 1737 in 10-months and 50EMA at 1332 would be a level to watch. Rs 1200 is strong support for the stock as it has been previous top for MARUTI. 50EMA-1477, 100-EMA1332, 200EMA-1132

[Dow Jones] Most auto shares down today, local analyst says sector after significant rise over last one year is likely due for correction. "The attraction for various auto players in India is the cost advantage, but the lack of labor reforms in the country and now with strikes at various units in recent times it is advisable to take profits in automobile shares," says A K Prabhakar, an independent analyst; adds, expects 1,600-2,000 point fall in BSE Auto index which now at 6,662.17 points, up 113.26 points on year, and much higher than its 52-week low on December 2, 2008 level of 2,127.86 points. Adds high raw material cost, high crude prices, generally stronger rupee vs dollar likely to hurt exports Please save in Favorite webpage - all the info about BSE listed stocks can be found. Always be an informed investor, never invest blindly!

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